New Microsoft Corp. (NASDAQ: MSFT) Chief Executive Satya Nadella took over as the company’s CEO in February, and by the look of things, the company’s prospects seem to be looking quite good, following a significant uptick in after-hours trading Thursday.
MSFT shares rallied by close to three percent in after-hours trading, moving up to $40.96, and reaching levels that have not been seen since the so-called “dot-com revolution” at the start of the 21st century. Microsoft shares are higher by about 8 percent since Nadella replaced Steven A. (Steve) Ballmer as chief executive, and up about 19 percent since Ballmer announced last August that he plans to retire from his post. In all, Microsoft has assuaged investor concerns regarding flagging personal computer (PC) sales and effectively beat Wall Street’s profit estimates, thanks to its strong performance in the stock market as of late.
Experts believe investors are looking forward to Nadella’s paradigm shift, wherein he pushes Microsoft to focus on the mobile space and on cloud computing. Typically, Microsoft has been successful in monetizing its PC business, and has done well with its Windows operating system (OS), and Nadella seems determined to look towards other potential revenue streams as he shifts from his predecessor’s vision. He will be facing market analysts later on Thursday in what will be his first conference call.
According to FBR Capital Markets analyst Daniel Ives, the ongoing April to June quarter of 2014 is a “nice step in the right direction” for Microsoft and its new CEO. “We would characterize these (financial) results as solid in a choppy IT spending environment,” he added. Analysts appear to be generally impressed with the businesslike Nadella, as opposed to the flamboyant Ballmer, who had received a lot of flak from number-crunchers during his tenure as Microsoft CEO.
The fact that Nadella has sought to monetize the cloud has, in turn, helped generate revenue for Microsoft’s server software arm, while PC sales have not taken as hard a landing as analysts have expected, therefore allowing Microsoft to mitigate whatever damage there was to its financials.
In quarter one of calendar 2014, Microsoft reported a quarterly profit of $5.66 billion, which redounded to 68 cents earnings per share; this represented a slight drop from the company’s $6.05 billion profit and 72 cents earnings per share in quarter one 2013. Q1 2014’s EPS reading was also higher than the 63 cents EPS consensus forecast, according to statistics from Thomson Reuters. Sales was at $20.4 billion last quarter, which fell in line with analyst estimates, while PC sales were down by 4.4 percent, as tablet computers and smartphones continue to spearhead what is informally referred to as the “post-PC” revolution.